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Breaking Bad: A Disaggregated Analysis of Inflation Inertia

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  • Cevik Serhan

    (International Monetary Fund, 700 19th Street, NW, 20431-0001, Washington, DC, USA)

Abstract

The post-pandemic rise in consumer prices across the world has renewed interest in inflation dynamics after decades of global disinflation. This paper contributes to the literature by providing a granular investigation of inflation persistence at the city level in Lithuania during the period 2000–2021, as well as a comparison of inflation persistence at the country level vis-à-vis the eurozone over the same period. Using disaggregate monthly data on the Consumer Price Index (CPI) collected in five major cities, the empirical analysis finds a mixed and ambiguous picture of inflation persistence across all CPI subcomponents. While there are mixed results for persistence of the headline inflation, most consumption categories exhibit significant persistence. As a result, shocks may not remain transitory and instead have persistent effects that could spillover across subcomponents depending on the size of the shock.

Suggested Citation

  • Cevik Serhan, 2023. "Breaking Bad: A Disaggregated Analysis of Inflation Inertia," Review of Economics, De Gruyter, vol. 74(3), pages 235-250, November.
    • Handle: RePEc:lus:reveco:v:74:y:2023:i:3:p:235-250:n:1
    DOI: 10.1515/roe-2023-0070
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